Japan is a significant partner of the United States in various foreign policy areas, particularly in security concerns, which range from hedging against Chinese military modernization to countering threats from North Korea. The U.S.-Japan military alliance, formed in 1952, grants the U.S. military the right to base U.S. troops—currently around 50,000 strong—and other military assets on Japanese territory. In return, the United States pledges to protect Japan’s security. Although candidate Donald Trump made statements critical of Japan during his campaign, relations have remained strong, at least on the surface.

Bilateral tensions have arisen in 2018, however. On North Korea policy, Tokyo has conveyed some anxiety about the Trump Administration’s change from confrontation to engagement, concerned that Japan’s priorities will be marginalized. More broadly, Japan is worried about the U.S. commitment to its security given Trump’s skepticism about U.S. alliances overseas. Contentious trade issues have also resurfaced as the two governments look to negotiate a bilateral accord. In addition, Japan has expressed disappointment about the Trump Administration’s decision to withdraw from the Trans-Pacific Partnership (TPP) agreement and the Paris Agreement on addressing climate change.

Japan is the United States’ fourth-largest overall trading partner, Japanese firms are the second largest source of foreign direct investment in the United States, and Japanese investors are the second largest foreign holders of U.S. treasuries. Tensions in the trade relationship have increased under the Trump Administration. The U.S.-Japan announcement on September 26, 2018, of their intent to begin formal bilateral trade agreement negotiations has eased concerns over potential U.S. import restrictions on motor vehicle and parts trade, but certain U.S. steel and aluminum imports from Japan remain subject to increased U.S. tariffs. The trade talks could prove challenging given the Trump Administration’s focus on the bilateral U.S. trade deficit, particularly in autos—Japan’s largest export to the United States in 2017. Japan had been hesitant to pursue bilateral negotiations as it remains committed to the TPP.

After years of turmoil, Japanese politics has been relatively stable since the December 2012 election victory of Prime Minister Shinzo Abe and his Liberal Democratic Party (LDP), and further consolidated in the LDP’s subsequent parliamentary gains. With the major opposition parties in disarray, the LDP’s dominance does not appear to be threatened. However, Abe may struggle to pursue the more controversial initiatives of his agenda, such as increasing the Japanese military’s capabilities and flexibility, because of his reliance on a coalition with a smaller party. Abe continues his diplomatic outreach, possibly hedging against an over-reliance on the U.S alliance. Since 2016, Abe has sought to stabilize relations with China, despite an ongoing territorial dispute and Japanese concerns about China’s increasing assertiveness in its maritime periphery. Relations with South Korea, while stable, remain fraught with sensitive historical issues and differences in how to approach North Korea. Elsewhere, Abe has pursued stronger relations with Australia, India, Russia, and several Southeast Asian nations.

In the past decade, U.S.-Japan defense cooperation has improved and evolved in response to security challenges, such as the North Korean missile threat and the confrontation between Japan and China over disputed islands. Abe accelerated the trend by passing controversial security legislation in 2015. Much of the implementation of the laws, as well as of U.S.-Japan defense guidelines updated the same year, lies ahead, and full realization of the goals to transform alliance coordination could require additional political capital and effort. Additional concerns remain about the implementation of an agreement to relocate the controversial Futenma base on Okinawa.